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Capellas Move to Have Little Impact on HP

HP customers, employees and analysts weigh in on Michael Capellas' departure from the company.

Michael Capellas played a central role in guiding the merger of Hewlett-Packard Co. and Compaq Computer Corp. from concept to fruition, particularly during the rough proxy battle before the deal closed and the ongoing integration of the two companies afterward.

However, to what degree his decision to leave will impact HP is unclear, according to customers, employees and analysts.

HP on Monday announced that Capellas, the former chairman and CEO of Compaq who has served as HPs president since the $18.5 billion deal was completed in May, is stepping down to "pursue other career opportunities." He will stay with HP until Dec. 1, although that could change if he takes a job with another company before then, said HP spokeswoman Rebecca Robboy.

Those opportunities reportedly are focused on WorldCom Inc., where he is said to be among the top candidates to become the chief executive of the embattled telecom giant. Officials at WorldCom declined to comment on their search to replace John Sidgmore as CEO of the bankrupt company. WorldCom is struggling with a $9 billion accounting scandal and an investigation by the federal Securities and Exchange Commission.

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"It was a surprise, but it wasnt a surprise," Dan Mahoney, an analyst with Giga Information Group Inc., in Santa Clara, Calif., said of Capellas decision. Like others who follow HP, Mahoney said he expected Capellas would leave the Palo Alto, Calif., company eventually but was taken aback at how soon.

"I didnt get the impression he was on his way out or was looking somewhere else," he said. "He probably has an opportunity for a CEO job somewhere else."

However, his departure will have little impact on HP, Mahoney said.

The company will not replace Capellas, and the heads of the business units who once reported to him will now report directly to Chairman and CEO Carly Fiorina. But Capellas and others within the company have done a good job merging HP and Compaq into a solid unit, Mahoney said.

"If it was Michaels plan nine months ago to work his way out of a job by building up a strong organization, he succeeded," Mahoney said.

Others agreed.

"The timing is such that the bulk of the integration of both companies is complete," said Mike Haines, an analyst with Gartner Inc., in Omaha Neb. "Im sure a lot of people in the market realized at some point they didnt need two CEOs. Now it seems to me like the organization is settling in. We knew Carly would be the head honcho."

However, some worried that Fiorina was taking on too much by having the business unit executives report to her. The risk, according to Martin Reynolds, a Gartner analyst in San Jose, Calif., is that it will be more difficult to keep the four business units aligned without Capellas there as the focal point.

But the same worries have not trickled down to employees or customers, who doubt Capellas departure will have much impact on them.

"I tend not to follow executive moves in general," said Jorge Abellas-Martin, chief information officer at Arnold Communications Worldwide, a Boston advertising agency that uses HP products, primarily printers. "A lot of it is immaterial. I dont think it matters a lot beyond the person at the very top."

Others agreed.

"I dont see that its going to have too much of an impact. HP seems to have made a strong commitment to the OpenView [enterprise management] platform," said OpenView user Paul Edmunds, senior network analyst at Duke Energy Corp., in Charlotte, N.C.

Mahoney, the Giga analyst, said that the heads of the business units have been the key HP contact for customers, and that isnt changing.

"For example, enterprise customers had more interaction with Peter Blackmore [vice president of the Enterprise Systems Group] than with Michael," Mahoney said.

Capellas departure was something that many inside HP expected.

"Everyone thought it was something that would probably happen in the future, but a lot of people are surprised and sad because he was the voice of us," said one employee who had worked under Capellas at Compaq for several years before the merger. "He had been in the ranks with all of us. There are a lot of folks from the HP side who seem sad to see him go, too, so its not like an us-versus-them thing."

However, she added that the employees from the Compaq side of the company still feel represented.

"Weve got two good execs from the Compaq side in Blackmore and [Mike] Winkler [executive vice president, HP Worldwide Operations]."

HP spokeswoman Robboy said Fiorina and others also expected Capellas to move on, and they support him in his decision.

"Hes been a CEO before, and youd expect him to want to be a CEO again," Robboy said. "He went beyond the call by staying on for so long in the transition."